Oil Gets a Boost From Weaker Dollar and Supply Optimism
January 19 2017 - 11:17PM
Dow Jones News
By Jenny W. Hsu
Crude futures gained traction in Asia trade on Friday, driven by
a weaker U.S. dollar and signs of the market tightening after major
oil producers agreed to cut output.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in February traded at $51.54 a barrel at 0228 GMT, up
$0.17 in the Globex electronic session. March Brent crude on
London's ICE Futures exchange rose $0.17 to $54.33 a barrel.
The U.S. dollar wavered as investors held back from making large
moves ahead of President-elect Donald Trump's inauguration speech
on Friday.
The WSJ Dollar Index, which measures the U.S. currency against
16 others, was recently down 0.1% after rising as much as 0.3%
overnight. As oil is traded in dollars, a weaker dollar gives
foreign traders stronger buying power.
"Everyone is waiting to see if U.S. oil production will really
surge under Trump," a Singapore-based fuel oil trader said, adding
that he expects volatile prices in the first 100 days of Trump's
administration.
An oil glut has depressed prices for more than two years. The
price collapse prompted a group of 20 oil producers from within and
outside the Organization of the Petroleum Exporting Countries to
agree on an output cut last year.
Even though the deal only went into effect this month, the
International Energy Agency said OPEC production has slowed,
declining by 320,000 barrels a day to 33.09 million barrels in
December.
"Early indications suggest a deeper OPEC reduction may be under
way for January, as Saudi Arabia and its neighbors enforce supply
cuts," the IEA said.
The contraction in inventory levels has added to the encouraging
news. IEA data showed oil storage in industrialized nations of the
Organization for Economic Cooperation and Development fell in
November.
"If the pattern continues it would be fair to assume a pickup in
demand combined with lower production in early 2017 will see prices
higher," said Stuart Ive, a client manager at OM Financial.
However, rising oil prices in the wake of an output cut may
prompt more U.S. shale producers to return to the oil patches. Seen
as the marginal producer, higher U.S. output could easily wipe out
OPEC's efforts to remove surplus barrels.
That worry was reflected in the price movement overnight. Oil
prices pared gains after data from the U.S. Energy Information
Administration showed crude stockpiles rose by 2.3 million barrels
in the week ended Jan. 13. The increase upended analysts'
expectations for a much smaller expansion.
"The crude build was due to a drop in refinery runs signaling
the beginning of maintenance season, while imports corrected only
modestly following the previous week's huge jump," Societe Generale
said in a note.
U.S. gasoline stocks also rose unexpectedly as production, down
just 2,000 barrels from the previous week, was little changed
despite softer domestic demand.
With slower global supply growth and lower production in many
oil-guzzling countries, global demand is expected to rise. In
China, the world's second-largest oil importer, crude production
for 2016 dropped 6.9% to 199.7 million metric tons, or 4 million
barrels, the National Bureau of Statistics said Friday.
Nymex reformulated gasoline blendstock for February--the
benchmark gasoline contract--rose 53 points to $1.5398 a gallon,
while February diesel traded at $1.6205, 22 points higher.
ICE gasoil for February changed hands at $479.50 a ton,
unchanged from Thursday's settlement.
--Chelsey Dulaney contributed to this article.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
January 19, 2017 23:02 ET (04:02 GMT)
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